Pearson LCCI Level 3 Certifi Cate In Cost And Management .
L3PearsonLCCI Level 3 Certificate inCost and ManagementAccounting (VRQ)(ASE20098)SPECIFICATIONIssue 2First teaching from September 2015
PearsonLCCI Level 3 Certificatein Cost and ManagementAccounting (VRQ) (ASE20098)SpecificationIssue 2First teaching from September 2015
Edexcel, BTEC and LCCI qualificationsEdexcel, BTEC and LCCI qualifications are awarded by Pearson, the UK’s largestawarding body offering academic and vocational qualifications that are globallyrecognised and benchmarked. For further information, please visit our qualificationwebsites at www.edexcel.com, www.btec.co.uk or www.lcci.org.uk. Alternatively,you can get in touch with us using the details on our contact us page atqualifications.pearson.com/contactusAbout PearsonPearson is the world's leading learning company, with 40,000 employees in morethan 70 countries working to help people of all ages to make measurable progressin their lives through learning. We put the learner at the centre of everything wedo, because wherever learning flourishes, so do people. Find out more about howwe can help you and your learners at qualifications.pearson.comThis specification is Issue 2. Key changes are sidelined in the document. We willinform centres of any changes to this issue. The latest issue can be found on ourwebsite, qualifications.pearson.comAcknowledgementsThis specification has been produced by Pearson on the basis of consultation withteachers, examiners, consultants and other interested parties. Pearson would like tothank all those who contributed their time and expertise to the specification’sdevelopment.References to third party material made in this specification are made in good faith.Pearson does not endorse, approve or accept responsibility for the content ofmaterials, which may be subject to change, or any opinions expressed therein.(Material may include textbooks, journals, magazines and other publications andwebsites.)All information in this specification is correct at time of publication.ISBN 978 1 446 92677 2All the material in this publication is copyright Pearson Education Limited 2015
IntroductionLCCI qualificationsLCCI qualifications are widely regarded by employers as preparing learners to carryout the key functions of modern international business. The qualifications arerecognised worldwide by employers, universities and professional bodies such asthe Association of Chartered Certified Accountants (ACCA).This new and engaging range of qualifications has been developed in collaborationwith professional bodies, employers and customers. We have conducted in-depth,independent consultation to ensure that the qualifications develop the breadth anddepth of knowledge, skills and understanding that students need to be effectiveemployees, and that the qualifications support progression pathways.LCCI offers a wider range of qualifications; they are available at levels1 to 4 across the following subject areas: English Language Marketing and Customer Service Business, Administration and IT Financial and Quantitative.This specification is part of the Financial and Quantitative suite of LCCIqualifications.Please refer to the Pearson website for details of other qualifications in the suite.This qualification replaces the LCCI Level 3 in Cost Accounting.
Purpose of the specificationThis specification sets out: the objectives of the qualification any other qualification(s) that a student must have completed before taking thequalification any prior knowledge and skills that the student is required to have before takingthe qualification any other requirements that a student must have satisfied before they will beassessed or before the qualification will be awarded the knowledge, understanding and skills that will be assessed as part of thequalification the method of assessment and any associated requirements relating to it the criteria against which a student’s level of attainment will be measured (suchas assessment criteria).
RationaleThe Pearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)meets the following purpose:The qualification builds on the Pearson LCCI Level 2 Certificate in Cost Accounting(VRQ) qualification to give students a detailed insight into the Cost andManagement Accounting principles and techniques they are likely to encounter intheir working lives.The qualification at level 3 has a practical focus with students applying knowledgeto various scenario-based situations. The inclusion of much more detailedManagement Accounting techniques allows students to gain a greater breadth anddepth of knowledge in this area, opening their progression opportunities to a widerfield of specialism.
Qualification aimThe Pearson LCCI Level 3 Cost and Management Accounting (VRQ) is for studentswho work in, or want to work in, accounting environments where they will berequired to use management accounting techniques which contribute to effectivedecision making and control.This qualification provides the student with the skills, knowledge and understandingof cost and management accounting which reflects the keys skills required inbusiness for short and long-term decision making, inventory control, accounting foroverheads, working capital management, standard costing and the preparation andcontrol of budgets.This qualification is trusted and valued by employers worldwide and recognised byuniversities and professional bodies.This will enhance their employability prospects in the accounting sector and allowprogression to the Pearson LCCI Level 4 Certificate in Management Accounting(VRQ) qualification.
ContentsSpecification at a glance1Knowledge, skills and understanding2ContentAssessment210Assessment summary10Assessment Objectives11Performance descriptors12Entry and assessment information13Student entry13Combinations of entry13Age13Resitting the qualification13Awarding and reporting13Access arrangements, reasonable adjustments and specialconsideration14Equality Act 2010 and Pearson equality policy15Malpractice16Language of assessment17Other information18Guided Learning Hours18Student recruitment18Prior learning and other requirements18Progression18Exemptions19National Occupational Standards19Codes19Support, training and resources20Appendix 1: Glossary of International AccountingStandards terminology23
Specification at a glanceThe Pearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)consists of one externally examined paper.Title: Pearson LCCI Level 3 Certificate in Cost and Management Accounting(VRQ) Externally assessed100% of thetotalqualificationOverview of content1Inventory management2Short-term decision making3Accounting for overheads4Budgetary planning and control5Working capital management6Standard costing and variances7Costing methods8Long-term decision making9Management Information Systems10 Accounting SystemsOverview of assessment One written externally set and marked paper, contributing 100% of the overallgrade of the qualification The examination will be 3 hours The examination will consist of 100 marks Students will be graded Pass/Merit/Distinction. A result of Fail will be recordedwhere students do not achieve the required marks for a Pass The paper comprises five questions Students should answer all questions Questions comprise short written answer and calculationsPearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)Specification – Issue 2 – September 2015 Pearson Education Limited 20151
Knowledge, skills and understandingContentThe following content must be covered to prepare students for the final assessmentof this qualification.1. Inventory managementSubject contentWhat students need to learn:1.1a) The benefits of inventory management and controlMaterials andinventorycontrolb) The calculation of the amount and cost of materialsneeded to meet the production plan, taking into accountprocess wastage and products rejectsc) The calculation of the amount and cost of opening andclosing inventory levels after taking into account theproduction plan, with process wastage and productsrejectsd) The costs of holding inventory and of running out ofinventorye) The calculation of the reorder level, maximum inventorycontrol level, minimum inventory control level, averageinventory and average inventory investmentf) The Economic Order Quantity (EOQ) formula to calculatethe EOQg) The inventory ordering and inventory holding costs fordiscrete order quantities to select the optimal orderquantity without using the EOQ formulah) The calculation of the order quantity to minimise costwhere quantity discounts are available2Pearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)Specification – Issue 2 – September 2015 Pearson Education Limited 2015
2. Short-term decision makingSubject contentWhat students need to learn:2.1a) The use of the high/low method in the identification ofcost behaviour with or without price changesShort-termcostbehaviourb) The calculation of costs per period or unit from fixed,variable, semi-variable or stepped patternsc) The forecast of costs using the high/low methodd) The key terms used in decision making, and theirdefinitions: sunk cost differential/incremental cost opportunity cost avoidable cost relevant coste) The limiting factors within an organisationf) The calculation of the contribution per unit of the limitingfactor, and recommend the product mix to maximiseprofitsg) The calculation of net profit using the optimum productmixh) The effect of time on cost behaviour2.2Break evenanalysisa) The calculation of the contribution/sales (C/S) ratio for asingle product and the weighted C/S ratio for a mix ofproductsb) The calculation of the break-even point (revenue andunits) in both single-product and multi-productsituationsc) The calculation of the margin of safety and targetedprofitd) The application and assumptions of cost-volume-profit(CVP) analysis in given situationse) The construction of the following charts for a singleproduct or multiple products: conventional break-even contribution break-even profit-volume (PV)f) The determination of the break-even point and themargin of safety from a chartPearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)Specification – Issue 2 – September 2015 Pearson Education Limited 20153
Subject contentWhat students need to learn:2.3a) The definition of the terms ‘marginal costing’ and‘absorption costing’Marginal andabsorptioncostingb) The preparation of profit statements applying bothabsorption and marginal costing (including theover/under absorption of overhead in absorption costing)c) Reconciliation of the reported profits between absorptionand marginal costing and explanation of the difference3. Accounting for overheadsSubject contentWhat students need to learn:3.1a) The allocation of production overheads to production andservice cost centresOverheadabsorptionb) The apportionment of production overheads toproduction and service cost centresc) The re-apportionment of production overheads fromservice cost centres to production cost centres usingrepeated distribution methodd) The reasons for using predetermined absorption ratese) The calculation and application of production overheadabsorption rates based upon direct material cost, directlabour cost, direct labour hours, machine hours and unitsof outputf) The factors influencing the choice of production overheadabsorption methodg) The calculation and use of absorption rates from atraditional production overhead budgeth) The calculation of a rate to absorb administration, sellingand distribution overheadsi)3.24ActivitybasedcostingThe calculation and application of any under or overabsorption of production overheada) The principles of activity based costing (ABC) and thecontrast between ABC and traditional approachesb) The calculation of cost driver rates and unit productioncosts based on ABC principlesPearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)Specification – Issue 2 – September 2015 Pearson Education Limited 2015
4. Budgetary planning and controlSubject contentWhat students need to learn:4.1a) The purpose of preparing budgetsPreparationof budgetsb) The benefits of budgetary planning and controlc) The meaning and importance of the principal budgetfactord) The preparation of the following budgets revenue production material usage materials purchases direct laboure) The differences between fixed and flexible budgetsf) The preparation of a flexed budget, compared withactual costs/revenues, detailing the variancesg) The bases for flexing budgetsh) The factors influencing the choice of budget period5. Working capital managementSubject contentWhat students need to learn:5.1a) The reasons why liquidity and cash flow managementare important for the successful operation of anybusinessManagingcash flowb) The preparation of detailed cash budgets on a monthlyor quarterly basisThis refers to forecasted cash budgets and not statements ofcash flow hence operating, investment and financialactivities will not be requiredc) The implications of, and ways to deal with, a cashsurplus/deficitd) The preparation of working capital budgetse) The calculation and management of the working capitalratiof) The calculation and management of the working capitalcyclePearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)Specification – Issue 2 – September 2015 Pearson Education Limited 20155
6. Standard costing and variancesSubject contentWhat students need to learn:6.1a) The meaning of standard costCalculatingvariancesb) The meaning and use of an ideal and an attainablestandardc) The calculation of the standard costd) The calculation of the total direct material variance andanalysis of this to price and usage variances where theprice variance is based upon issuese) The standard hour as a measure of output for adepartment or a mix of productsf) The calculation of the total direct labour variance andanalysis of this to rate and efficiency variancesg) The potential relationship between labour and materialvariancesh) The calculation of total fixed production overheadvariance and analysis of this to expenditure and volumevariancei)The reasons for variancesj) The calculation of ratios of production volume (activity),production efficiency and capacityk) Reconciliation of budgeted and actual profit usingappropriate variancesl)6Use of given cost variances to calculate standard oractual production costsPearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)Specification – Issue 2 – September 2015 Pearson Education Limited 2015
7. Costing methodsSubject contentWhat students need to learn:7.1 Processcostinga) The purpose of process costingb) The preparation of process accounts and profitstatements where normal or abnormal losses/gains occuralong with their associated scrap values or disposal costsc) The meaning of joint and by-productsd) The calculation of the value of by-productse) The preparation of normal loss, abnormal loss andabnormal gain accountsf) The value of completed production and work-in-progressusing equivalent units, and using a First In First Out(FIFO) or weighted average (AVCO) approachg) The calculation of joint products apportioning joint costson the basis of physical units, weight, sales value andnet sales valueh) The interpretation of the results of joint productaccounting8. Long-term decision makingSubject contentWhat students need to learn:8.1a) The difference between long-term and short-termdecision makingInvestmentappraisalb) The Discounted Cash Flow (DCF), and how discountingovercomes the limitations of traditional techniquesc) Net Present Value (NPV) and Internal Rate of Return(IRR) discounting methodsd) The calculation of the NPV of proposed capitalinvestmentse) The calculation of the IRR of proposed capitalinvestmentsf) The preparation of capital investment appraisals usingDCF, NPV and IRRg) Comparison of IRR and NPV methods and explain whythe two techniques do not necessarily rank projects inthe same orderh) The calculation of discounted payback of a proposedcapital investmentPearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)Specification – Issue 2 – September 2015 Pearson Education Limited 20157
9. Management Information SystemsSubject contentWhat students need to learn:9.1a) The characteristics of effective management informationThe role ofManagementInformationSystems(MIS) in costandmanagementaccountingb) The controls in place to ensure confidentiality andsecurity is maintained when dealing with managementinformation10. Accounting SystemsSubject contentWhat students need to learn:10.1 AccountingSystemsa) Distinguish between integrated and non-integratedaccounting systemsb) Explain the importance, and demonstrate the use, ofcontrol accounts with particular emphasis on rawmaterials, work-in-progress, finished goods andproduction overheadsc) Post entries in a ledger, for an integrated system usingabsorption or marginal costing and historic or standardcostingd) Post entries as in (c) but for a non-integrated systeme) Explain and demonstrate the need for reconciliation in anon-integrated systemf) Prepare a profit reconciliation statement in a nonintegrated system8Pearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)Specification – Issue 2 – September 2015 Pearson Education Limited 2015
The following skills should be developed throughout the course of study.SkillsStudents should:a) Calculate and comment on inventory costs and controlsb) Complete inventory record cardsc) Understand the key terms used in short term decisionmaking, and their definitionsd) Apply calculations including the high low method andlimiting factorse) Understand the terms involved in break-even analysisf) Make calculations and apply cost-volume-profit analysisg) Calculate and use market and cost based transfer pricesh) Construct break-even chartsi)Understand the terms used in marginal and absorptioncostingj) Prepare profit statements applying both absorption andmarginal costingk) Understand the terms used in overhead absorptionl)Apply various techniques in overhead absorptionm) Understand the terms and the purpose of preparingbudgetsn) Prepare both fixed and flexible budgetso) Understand the terms used in cash flow managementp) Prepare working capital and detailed cash budgetsq) Understand the term and the calculations used instandard costingr) Calculate labour, material and overhead variancess) Understand relationships between labour and materialvariancest) Understand the terms and the purpose of process costingu) Undertake the necessary calculations for process costingv) Understand the terms used in investment appraisalw) Calculate and apply investment appraisal techniquesx) Understand the role of MIS in information confidentialityand securityPearson LCCI Level 3 Certificate in Cost and Management Accounting (VRQ)Specification – Issue 2 – September 2015 Pearson Education Limited 20159
AssessmentAssessment summaryPearson LCCI Level 3 Certificate in Cost and Management Accounting(VRQ)First teaching: September 2015Number of series: 8Overview of content1Inventory management2Short-term decision making3Accounting for overheads4Budgetary planning and control5Working capital management6Standard costing and variances7Costing methods8Long-term decision making9Management Information Systems10 Accounting SystemsOverview of assessment One written externally set and marked paper, contributing 100% of the overallgrade of the qualification The examination will be 3 hours The examination will consist of 100 marks Students will be graded Pass/Merit/Distinction. A result of Fail will be recordedwhere students do not achieve the required marks for a Pass The paper comprises five questions Students should answer all questions Questions comprise short written answer and calculations Calculators may be used in the exam Bilingu
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